Decentralized

Basics

• The opposite of Centralized. Decentralization is a term often used within the blockchain space and is used as an ideal to work towards. It is generally thought of that a Layer One blockchain should be set up in such a way that it is decentralized from the start (a permissionless nature, good coin distribution mechanism, etc.). Within the DeFi space, plenty of DApps start out centralized but promise to (and sometimes do) decentralize over time.
• From this post by Komodo

The debate over the word “decentralized,” and what exactly it means, is not a new one. In this excellent essay by Tony Sheng from September 2018, a few different definitions of “decentralized” are put forth:

• “‘Decentralized’ is defined as the opposite of ‘centralized.’ ‘Decentralized’ is an ‘antonymic definition’— defined only as the opposite of something else.”
• “Cambridge Centre for Alternative Finance describes decentralization as a property that emerges from the roles, behaviors, and influence of actors on each layer–protocol, network, and data of a distributed ledger.”
• “Vitalik takes a crack in early 2017: ‘Blockchains are politically decentralized (no one controls them) and architecturally decentralized (no infrastructural central point of failure) but they are logically centralized (there is one commonly agreed state and the system behaves like a single computer)’.”
• “As Sarah Jamie Lewis says in her thread on decentralization… decentralization is the degree to which an entity within the system can resist coercion and still function as part of the system.”

Ultimately, Sheng suggests that defining “decentralized” and measuring decentralization is neither possible nor particularly relevant because:

“‘Decentralized’ is a platonic ideal that trust and power are distributed in a superlatively fair way. It’s not something that can be reached, but a useful thing to reach towards.”

While Sheng is right that nailing down a precise and universally accepted definition of “decentralized” is not a realistic goal, it is useful nonetheless to put forth some basic criteria— conditions that are necessary but perhaps not always sufficient— in order for a project, app, software, or system to be considered “decentralized.” 

Decentralized and Distributed

Distributed: Not all the processing of the transactions is done in the same place.

Decentralized: Not one single entity has control over all the processing.